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Recent comments from Elvira Nabiullina, the Governor of Russia’s central bank, have raised questions about the sustainability of Russia’s boom in consumer lending. While it may be too early to worry about a banking crisis in Russia, we think that the …
9th December 2013
The recent escalation of political protests in Kiev has put Ukraine's fragile external position back in the spotlight. A full-blown balance of payments crisis remains a real risk. The one crumb of comfort is that the threat of a sovereign default is …
5th December 2013
Governor Belka reiterated his “forward guidance” at today’s post-MPC meeting press conference, pledging not to raise interest rates until the end of the first half of 2014 at the earliest. For our part, we think the first rate hike is likely to come in …
4th December 2013
The breakdown of GDP data released this morning for several Central and South Eastern European economies confirmed that the moderate recovery in the third quarter was supported in large part by stronger export growth. In addition, the data confirmed that …
The reaction in the Ukrainian financial markets to escalating political protests in Kiev has been smaller than might have been expected. There is a large amount of uncertainty about what will happen from here on. But with the economy already in recession …
2nd December 2013
The latest PMIs for Emerging Europe show that the region's manufacturing sector strengthened further in November. The important exception is Russia, whose PMI fell back last month, adding to the evidence that the economy is yet to turn the corner. … …
The detailed breakdown of third quarter Polish GDP data showed that, while net trade remained the main driver of growth, domestic demand has finally come out of its year-long slump. … Polish recovery supported by turnaround in domestic …
29th November 2013
A raft of GDP data released over the past month confirmed that growth in Emerging Europe accelerated in Q3, albeit gradually. Overall, we calculate that regional GDP expanded by 1.8% y/y, up from 1.6% y/y in Q2. The recovery is being led by Central and …
28th November 2013
Emerging market (EM) inflation has crept up in recent months, but it remains low by historic standards. Looking ahead, inflation should be kept anchored by subdued domestic price pressures and recent declines in global commodity prices. … EM inflation to …
27th November 2013
Today's cut in Hungarian interest rates is likely to be followed up by one more cut next month, which we currently think will mark the end of the easing cycle. However, the recent sharp fall in inflation, coupled with the surprise decision by the ECB to …
26th November 2013
There’s a lot of uncertainty about what will happen next in Ukraine following the government’s decision to suspend preparations for an Association Agreement with the EU, apparently under pressure from Russia. A move towards Russia could bring some …
25th November 2013
It’s been a bumpy few weeks for equities and currencies in the region. Those in the two largest economies, Turkey and Russia, have underperformed. Meanwhile, the Czech koruna has posted the largest loss among all EM currencies over the past month …
22nd November 2013
In spite of mounting speculation that Croatia’s debt burden will force the authorities to turn to the IMF for help, we think that the country might still be able to avoid a bail-out. Even so, these concerns merely underline the weakness of the fiscal …
21st November 2013
Following last week’s disappointing Q3 GDP growth figures, today’s release of activity data for October suggests that the Russian economy made a weak start to Q4 too. Indeed, the only crumb of comfort is that this summer’s good harvest finally seems to be …
20th November 2013
The Turkish central bank made a small adjustment to its liquidity provision today which should lead to a modest rise in market interest rates. However, there's little more that the MPC can now do to tighten policy without raising official interest rates. …
19th November 2013
Central and South Eastern Europe seems to have shrugged off the slowdown in the euro-zone in the third quarter of this year, with growth accelerating in most countries. The exception was the Czech Republic, where output contracted in quarterly terms. …
14th November 2013
We have been among the most pessimistic forecasters on Emerging Europe over the past five years and the as yet unresolved debt problems in the euro-zone continue to cast a long shadow over the outlook. But assuming that the single currency bloc manages to …
13th November 2013
The weaker-than-expected 1.2% y/y increase in Russian GDP in Q3 is likely to reinforce concerns that the slump in Emerging Europe’s largest economy over the past year will be longer-lasting than many had initially assumed. But although the headline growth …
12th November 2013
Last week’s decision by Russia’s Ministry of Economy to downgrade its forecasts for long-run growth has revived the debate about what policymakers need to do in order for Russia to regain its economic vigour. While most commentators have made the case for …
11th November 2013
The Central Bank of Russia (CBR) kept interest rates on hold today and gave little indication that it is about to loosen policy to support the struggling economy. … Central Bank of Russia still happy to bide its …
8th November 2013
Faced with growing concerns about deflation, the Czech National Bank voted to ease monetary policy further today by intervening in the foreign exchange market to weaken the koruna. Few details were provided, except that the MPC aims to keep the currency …
7th November 2013
The sharp downgrade to the long-run growth forecasts released by Russia’s Economy Ministry earlier today is the clearest signal yet that Moscow believes that economic weakness over the past year has been structural rather than cyclical in nature. One …
The Polish National Bank extended its version of “forward guidance” today, stating that interest rates will be left on hold until the second half of next year. We think the existence of significant slack in the economy means inflation will remain subdued …
6th November 2013
Having lowered interest rates earlier today, Romania’s National Bank Governor, Mugur Isarescu, gave a strong hint that further cuts are likely in the months ahead. This dovish stance has been supported by weaker-than-expected inflation as well as sluggish …
5th November 2013
The partial release of October’s manufacturing PMIs for Emerging Europe provide further evidence that the region’s recovery continued at the start of the fourth quarter. The Czech PMI is now consistent with manufacturing production rising by around 2.5% …
1st November 2013
Growth in Emerging Europe continues to accelerate, but the recovery remains uneven. Central Europe, and Poland in particular, is leading the way. This is thanks to the recent improvement in key euro-zone trading partners as well as strengthening domestic …
31st October 2013
Hungarian policymakers cut interest rates again today, but there are a whole host of reasons to think that the easing cycle is nearing an end. The economy is recovering and core inflation is rising. What’s more, it’s not clear that rates can be lowered …
29th October 2013
This weekend’s inconclusive Czech legislative election has raised the prospect of a prolonged period of political uncertainty, which many suggest could have a detrimental impact on the economy and the financial markets. But this overlooks the fact that …
28th October 2013
Equity markets in Emerging Europe have outperformed the rest of the emerging world over the past month. The largest gains have come in Central Europe, where the growth outlook continues to improve. Looking ahead, we think there's scope for further gains …
25th October 2013
The early signs suggest that Turkey’s economy has emerged from this summer’s turbulence in financial markets relatively unscathed. Nonetheless, while GDP growth appears to have held up, it has been supported by a further expansion of credit and …
24th October 2013
Emerging market (EM) inflation has been fairly stable in recent months. It edged up in September but there is little reason to think that a sharp acceleration is in the offing. … EM inflation likely to remain in …
The decision by the Turkish central bank to keep interest rates on hold today reflects the stabilisation of capital inflows and the strengthening of the lira over the past couple of months. But concerns about the current account deficit, coupled with …
23rd October 2013
The latest economic data from Emerging Europe shows that, while growth in the region as a whole is accelerating, the recovery remains extremely uneven. In Poland, GDP growth seems to have picked up sharply in Q3. But the region’s largest economy, Russia, …
17th October 2013
Inflation in Central and South Eastern Europe slowed to a record low in September and is likely to remain subdued throughout 2014, even as growth recovers. This in turn should mean that monetary policy will remain extremely accommodative. … Inflation …
16th October 2013
While the economic challenges facing Russia and Turkey are growing, we're becoming increasingly optimistic about the outlook for the rest of Emerging Europe. The pick-up in growth in recent months has owed much to the turnaround in the euro-zone in …
15th October 2013
Having introduced an entirely new benchmark interest rate at its last meeting and unveiled new lending facilities at each of its two meetings prior to that, the Central Bank of Russia opted to do nothing today, leaving key rates and lending facilities …
14th October 2013
Ukraine’s banks have substantially decreased their external vulnerabilities over the past few years, meaning that they are now better placed to withstand a modest hryvnia devaluation and/or a slowdown in capital inflows. That said, the banking system is …
11th October 2013
The slump in Russia’s economy over the past year is starting to weigh on its public finances. The deterioration has so far been fairly modest and the fiscal position looks manageable for now. But the budget deficit is likely to widen in 2014-15, leaving …
9th October 2013
The tendency of most forecasters (including ourselves) to focus on the growth prospects for Emerging Europe over a one or two year horizon means that the region’s medium-term growth potential is often overlooked. In general, we’re pretty upbeat. But …
7th October 2013
With Poland’s economy now picking up, attention is turning to when monetary policy might start to be tightened. The financial markets are pricing in a first rate hike in Q1 of next year. However, we think that inflation is unlikely to rise substantially …
2nd October 2013
September’s PMIs suggest that manufacturing in the highly-open Central European economies continued to recover and that Turkey’s manufacturing sector rebounded. However, growth in Turkey appears to have been driven by domestic demand which suggests that …
1st October 2013
The Romanian central bank cut interest rates again today against the backdrop of weak growth and falling inflation. However, the Bank lowered rates by less than it did in August due, it seems, to fears of currency weakness – a particular concern in …
30th September 2013
A recent warning from Russia’s Deputy Finance Minister has led to renewed concerns about the country’s growing burden of external debt. But while debt has risen sharply in recent quarters, we don’t think that it is a cause for immediate concern. … …
September’s European Commission Economic Sentiment Indicators (ESIs) allow us to form an early view of how Emerging Europe has performed in Q3, and the good news is that the recovery seems to be building momentum. Growth appears to have accelerated in …
27th September 2013
The latest activity data show that Emerging Europe’s recovery is continuing. Detailed Q2 GDP figures released this month confirmed that the region as a whole grew by 1.6% y/y, up from 1.3% y/y in the first quarter. And more timely data suggest that …
The strengthening of the Czech economy is preventing the National Bank from plumping for furtherpolicy easing, namely FX intervention to weaken the koruna. With the economic recovery still fragile, theMPC is likely to keep the threat of intervention on …
26th September 2013
Emerging market inflation edged down in August and there’s little evidence to suggest that there will be a significant rise in price pressures over the coming months. … Few signs of EM inflation …
24th September 2013
Following today’s cut in Hungarian interest rates, we are revising our year-end rate forecast to 3.00% from 3.50%. With inflation below target and the economic recovery still fragile, it looks like the dovish MPC will seek to ease policy as far as it can. …
The reaction of the financial markets in Central Europe to the US Fed’s decision to hold off tapering QE was decidedly muted. But these countries’ markets didn’t suffer the large sell-offs seen elsewhere in the emerging world last month. Looking ahead, …
The outlook for much of Emerging Europe has brightened in recent months and we expect growth in most countries to accelerate over the coming quarters. The strengthening of the euro-zone should support local industry while a gradual recovery in domestic …
20th September 2013
